How to find startup investors

How to find startup investors… one of the most common questions we get asked at SeedLegals. Having been both a founder and angel investor, as well as having the pleasure of working with hundreds of entrepreneurs and investors, I like to think I’ve picked up a thing or two – from both sides of the deal. So, here’s my guide to finding investors for every stage of your business.

First, let’s define the stage your business is at, in VC industry-speak:

• Pre-seed: you’re pre-idea or pre-product (and therefore pre-revenue)
• Seed: post-product, on the cusp of revenue or just post-revenue (e.g. making £10k a month)
• Series A: post-product, near making £1M annual recurring revenue (ARR)
• Series B: £10M ARR

The different types of startup investment

Now let’s break down the main sources of equity capital for startups:

• Grants
• Incubators / accelerators
• Angel investors
• Crowdfunding
• Venture capital funds

Grants, grants, grants

• Good for – any startup, particularly if you’re in a university or working in scientific research
• Pros – free money
• Cons – time to find and apply; low success rate for companies outside university, science or tech sectors

Before you consider private investors, it’s worth a search for grant options. They’re free money, not a loan and don’t take any of your equity.

But grants come with a couple of challenges. The first is where to look. A Google search will get you started but grant funding is not as heavily marketed as VC funds. If you’re struggling to figure out what options are available to you, reach out to other founders or investors in your network to see what they’ve come across and help you navigate that landscape.

The second issue is grants can be very competitive, depending on which sector you’re in. If you’re a startup housed in a university (say in a lab) or your work is heavily based on scientific research or new tech, there’s a good chance there will be grant money out there for you. A great place to start is Innovate UK. Outside of these sectors, competition is tough so you’ll need to weigh up whether the time spent on grant applications is worth the potential chance of success.

Grants won’t fuel you forever but if you can get them then make the most of their non-dilutive benefit in the early stages of your business. Once you raise from investors, you’ll have to give away equity. This means more people have a say in your company and you have less control.
But if grant funding isn’t an option or you’ve exhausted your options, what next? For early-stage startups, there are two key routes: incubators / accelerators and angel investors.

Incubators / accelerators

• Good for – pre-seed companies
• Pros – training and resources, early access to VCs
• Cons – pay in equity, not open to all businesses, not accessible all year round

Incubators and accelerators are programmes that give startups training, mentoring and often a seed investment to help fast-track their business growth. Incubators will support entrepreneurs who are still in the idea stage and working to determine product-market fit. Accelerators tend to run for a set timeframe and help startups who already have an MVP get investment-ready.

For first-time founders, the resources, networking and expert advice provided by these programmes can be invaluable for getting your business off the ground.

At the end of an incubator or accelerator, there will be a ‘demo day’ where you’ll pitch to VCs and angel investors. This gives you a springboard to raise your next round or build those important VC relationships early on in your fundraising journey. It’s a good idea to look into the reputation of any incubators/accelerators you apply to as the most renowned programmes like Antler and Entrepreneur First will give you the widest access to investors.

Keep in mind that while you don’t pay cash for an incubator/accelerator, you do pay in equity. The organisation will often take a stake in your business in return for the resources they’re giving you.

Angel investors

• Good for – any business
• Pros – quickest source of capital
• Cons – usually invest less money than a VC so you need more to fill your round which can be an administrative hassle

Angel investors are individuals who write relatively small tickets into your business (anything from £1k – £100k). They are most likely to be the very first private investors in your business. Why? For a few reasons:

• The average ticket size written by angels or a group of angels is generally too small for funds to consider (e.g. <£100k)
• The UK government incentivises angels to invest in early-stage businesses through SEIS and EIS tax relief
• Compared to a VC fund, angels can be very quick to commit and execute their investment

But angels are much harder to find than VCs. Most don’t actively market themselves but there are thousands in the UK alone. So, as a founder, you need to go looking. Here’s a few ways to stand out from the crowd…

How to find angel investors

Get your SEIS/EIS Advance Assurance

Applying for SEIS/EIS Advance Assurance makes you dramatically more investable. It gives your investors significant tax incentives that make investing early much less risky. Many angels simply won’t be interested if you’re not offering SEIS/EIS.

If you’re eligible, get your Advance Assurance before you start approaching angels. That way you can advertise it on your pitch deck and social media. It can take HMRC a few weeks to approve your application so it’s worth getting everything ready before you start talking to investors to avoid delays.

Be noisy

Make it easy for investors to find you. About to launch your MVP? Just signed a brand name partnership? Shout about it on LinkedIn and X. The more angels see your name pop up, the more likely they’ll be to reach out to you. Plus you might attract some new customers or partners too.

Look at your own network

Think about who you know and who they may be connected to in the world of investment. Warm referrals are the best for angel investors so ask for introductions from existing investors, advisors, mentors, accelerators or even early customers.

If you don’t know these people yet then start building your network through events and any founder friends you’ve made in the industry.

Hunt, hunt, hunt

If you’ve run out of leads then it’s time to get digging. Look up companies in your sector on Crunchbase, Companies House and LinkedIn to see who’s invested in them. Angels are unlikely to invest in a direct competitor but you can see who else those angels are connected with and any active angel networks they are part of.

When you’re doing cold outreach, make sure you do your research first. Learn as much as possible about their thesis and the sectors and stage of companies they invest in. Make your email personal by referencing something they’ve done and show why you’re the right fit for each other.

A great tip I got from a ‘super angel’ was that the best way to stand out is to open your message with a one-liner that says something noteworthy about you as an entrepreneur. Maybe you’ve founded a business before, worked at a top tech company or you already have a commercial agreement with a brand name. Get them interested beyond a standard ‘let’s connect’ message.

It’s important your LinkedIn profile is up-to-date as that’s likely the first thing an angel will look at to assess your credibility. Always send a deck along with your outreach and don’t force an investor to sign an NDA before they see it. They’re not looking to steal ideas, they’re looking for people who can implement great ideas.

Perfect your elevator pitch

As well as having a stand-out pitch deck, you want to have a clear and succinct elevator pitch. Make sure you can explain what you do in under 60 seconds – if you can keep it to 30 seconds, even better.

You don’t need to explain everything. It’s just about sparking an investor’s interest. Keep it short, impactful and practise, practise, practise.

Crowdfunding

• Good for – consumer-focused business
• Pros – access to wider pool of capital, increase brand awareness and loyalty
• Cons – fees on capital raised, can’t access generally until you have significant private investment committed

Crowdfunders are platforms that allow you to fundraise from the general public.

There are both private and public crowdfunders. Private ones like UK Business Angels Association market your deal to their membership of angels and funds. Public ones such as Seedrs, Crowdcube or Kickstarter are open to anyone.

Which platform you choose depends on what you want and what you’re willing to give away. For consumer product business, platforms like Kickstarter help you raise money by selling early prototypes to customers. On Crowdcube and Seedrs, you’ll be selling equity. All options are great for marketing to the wider public and building a loyal customer base.

The drawback of equity crowdfunding is you’ll need to have a significant amount of private investment committed (generally at least 30% of your total amount) before that platform will market you to their community. And they’re not cheap – the fees on these rounds start at 6% of the equity you raise.

VC funds

• Good for – late seed or Series A startups
• Pros – large sums to accelerate growth, boost your profile
• Cons – time intensive process to raise

Before you even consider talking to VCs, you need to think about whether you’re ready for VC funding. VCs generally come in at the late Seed or Series A stage when you’ve released your first product and are ready to scale. They’ll usually expect you to grow quickly and exit or IPO within around 5 years.

How to find VC funds

If you are ready to look for VC funds, here are some top tips for finding them:

• Decide how much it is you need to raise: be realistic, if you go too high, chances are you’re pitching to the wrong VCs which is a waste of your time (and theirs).
• Look for VCs that fit your sector and stage: VCs are very well advertised. A good few Google searches will give you plenty of information. Once you start following enough people in the startup ecosystem, chances are you’ll find someone publishing a free database of investors with their investment strategy and focus. Crunchbase is also a good source of info.
• Filter your list: if your business is not eligible for SEIS/EIS, don’t pitch to any of the SEIS/EIS funds – they simply won’t be able to invest no matter how great your company is.
• Identify your nearest competitors and find out who the VCs are: don’t approach these ones. It’s very unlikely that VCs will invest in companies that compete with their portfolio.
• Identify your ‘hottest leads’: your target list will probably be very long unless your business is quite niche. Pick the ones you think will be the best match and make it a number you can realistically handle, say 30. If a VC rejects you (they will, it’s a numbers game), add one of your backups to the list.
• Try to get a warm intro through your network: it’s not essential but it can help you stand out as VCs receive hundreds of decks. Don’t worry if you can’t get an intro as many VCs now publish their emails on the website or let you submit your pitch through their website.
• Get on social media: VC Twitter (and general social media) provides a fantastic opportunity to engage. You can build relationships with VCs by approaching them directly or engaging with their content.
• Send a deck: as with angel investors, make it easy to send your deck with SeedLegals Pitch and don’t lock it behind an NDA.
• Keep up the momentum: in the initial conversation, understand what their decision-making process is and hold them to it. It’s very easy for VCs to fall behind given the workload that comes in screening tens or hundreds of deals a week.
• Make noise: junior VCs in particular hunt actively for deals. Their careers could be made by finding the next Stripe. They populate social media. Keep making noise and chances are VCs could approach you.

An important thing to remember about VCs is that investing is their job. Their careers are made by investing in the best founders and companies at the right time. When you’re reaching out and sharing information about your startup, you’re not bothering them. In fact, if you’re truly the right fit, you’re helping them discover a potential career-maker and fund returner.

Just make sure to do your research and craft the perfect message about how your company aligns with their thesis, their vision and most importantly, has true potential of supporting the unicorn-level exit they’re all looking for.

Talk to the funding experts

Want more advice on moving forward in your funding journey? We’ve helped 50,000+ startups grow and are here to help whatever stage you are at. Book in a free call with one of our funding strategists.